Teresa has today welcomed the news that short-term lender Wonga is to make major changes to its affordability criteria following discussions with the Financial Conduct Authority (FCA).
Wonga has entered into an agreement, known as a voluntary requirement (VREQ), with the Financial Conduct Authority (FCA) that requires it to make significant changes to its business immediately.
When it took over regulation of consumer credit in April of this year, the FCA requested information about the volume of Wonga’s relending rates. The information received suggested Wonga was not taking adequate steps to assess customers’ ability to meet repayments in a sustainable manner.
The FCA has agreed an approach with Wonga for remedial redress for those customers who were affected:
- Approximately 330,000 customers who are currently in excess of 30 days in arrears will have the balance of their loan written off and will owe Wonga nothing.
- Approximately 45,000 customers who are between 0 and 29 days in arrears will be asked to repay their debt without interest and charges and will be given an option of paying off their debt over an extended period of four months.
Wonga will be contacting all customers directly by the 10th October 2014 to notify them if they will be included in the redress programme. Customers should now continue to make payments unless they are told to stop by the firm. Borrowers who are experiencing financial difficulty should contact
Wonga to discuss their options.
As of today, Wonga has introduced new interim lending criteria that should improve customer outcomes. It is also working to put in place a new permanent lending decision platform as soon as possible.
Following this news, Teresa said:
“I welcome the news today that Wonga will be changing its affordability criteria. It is no secret that there has been a significant increase in the number of people who are having to take out short-term loans in order to make ends meet over the last few years. It is crucial that standards are improved across the credit market and the short-term lending market to ensure lenders lend affordably and responsibly.
It is good news that Wonga has taken action to help those customers who were issued loans without evidence they could afford to repay them. I hope that this will be a rude awakening to lenders across the industry and encourage them to property assess the circumstances of people who wish to take out loans to ensure they are not trapped in a never-ending cycle of debt.”